US Federal Reserve Chairman Warns of Extended Recession

US Federal Reserve Chairman Warns of Extended Recession

"While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks", Powell said.

House Democrats proposed a $3-trillion virus relief bill Tuesday, combining aid to state and local governments with direct cash payments, expanded unemployment insurance and food-stamp spending as well as a list of progressive priorities such as funds for voting by mail and the troubled U.S. Postal Service.

This money would come on top of roughly three trillion U.S. dollars in earlier financial assistance that the government has provided.

The Fed has cut its prime lending rate to near zero and rolled out several lending and liquidity programs.

"We're picking up from what was a negative session in offshore markets - NY in particular", said Ray Attrill, head of foreign exchange strategy for National Australia Bank in Sydney.

This article is republished here with permission from The Associated Press.

Senate Majority Leader Mitch McConnell, a Kentucky Republican, said there is no "urgency" to act.

Asian equities were set to slump on Thursday after the head of the Federal Reserve warned of a "significantly worse" USA recession than any downturn since World War Two because of coronavirus pandemic fallout, sentiments that drove bonds higher on a safety bid.

"The loss of thousands of small- and medium-sized businesses across the country would destroy the life's work and family legacy of many business and community leaders and limit the strength of the recovery when it comes", Powell continued.

"Deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy", the chairman warned in his prepared remarks before holding the online discussion.

"Avoidable household and business insolvencies can weigh on growth for years to come", the Fed chairman said.

Wall Street's main indexes were lower in choppy trading on Thursday, as renewed worries about Sino-US trade relations added to fears of an extended economic downturn due to the virus outbreak.

Schwab's Kleintop said Powell's tone was more pessimistic than in the recent past.

The Standard & Poor's 500 stock index was down a sharp 2.4% as of 3pm Eastern time, with the deepest losses hitting stocks that most need a healthy economy for their profits to grow.

The Fed has ruled out "negative interest rates".

That would be meant to encourage them to lend the money instead.

"The committee's view on negative rates really has not changed".

"Earnings season is largely behind us and we have entered the phase two of Covid-19 as de-confinement of economies begins, and that is creating a lot of uncertainties on a daily basis, which is weighing on markets", said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

And Tom Barkin, head of the Richmond Fed, suggested Tuesday in an interview with the Wall Street Journal that the economy has "bottomed" and is likely "headed up".

Among people who had been working in February, almost 40% of households earning less than $40,000 a year lost a job in March, Mr Powell said.

The Labor Department said on Wednesday the USA producer price index fell 1.3% in April after slipping 0.2% in March.

"It'll take some time to get back to where we were", he said. "I think they are oversold".

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